I’ve got a charging order – can I enforce it?

If you have a court judgment in your favour that the debtor is not able to immediately pay, one method of enforcing that judgment is to apply for a charging order against the debtor’s property.

A charging order secures a judgment debt by imposing a charge over the debtor’s interest in land or other assets. It prevents the debtor from selling the property without paying what is owed to the creditor first.

However, the charging order does not force the debtor to sell his property and in many cases, the charging order will simply sit on the property until it is sold. In such circumstances, if a creditor requires their money sooner, they can make an application for an Order for Sale, whereby the court will order that the property is sold so that the creditor can be repaid from the proceeds.

Order for Sale

Before applying for an Order for Sale, creditors need to carry out some research into the property itself to see whether there are any other charges (or mortgages) registered against the property, which will need to be paid off before their own charging order. An assessment of the property’s value should be undertaken to ensure that there is sufficient equity in the property to be able to pay off the charging order after any other charge holders have been paid. If there are not likely to be sufficient funds to repay the creditor, then an Order for Sale is unlikely to be appropriate and the court may be reluctant to grant the same.

Creditors also need to confirm who lives in the property and this information, as well as the above information, will need to be provided to the court in an application that is made for an Order for Sale.

The granting of an Order for Sale is entirely within the court’s discretion. They will take into account all the circumstances of the case and application, including:

• The prospects of the debt being repaid without the sale of the property
  If the debtor is able to put forward genuine proposals to be able to repay the debt within a reasonable period of time (backed up with evidence), then the court will take this into consideration.

• The conduct of the debtor
  If the debtor has not made any offers to repay the debt or not engaged with the creditor, or has broken arrangements to repay the debt, then such conduct will not be looked on favourably by the court.

• The size of the judgment debt and the value of the property
  Although there are no rules about the minimum value of a debt that can be enforced by an Order for Sale, it is a factor that the courts will consider when deciding to grant an Order for Sale. Similarly, the courts will look at the value of the property to see if there is sufficient equity to repay the debt. If the court believes that the value of the debt is too low or there is insufficient equity, then they may refuse the Order for Sale on the grounds that other enforcement methods may be more appropriate.

• Any human rights issues and the occupiers of the property
  Although the fact that there may be other occupiers in the property does not prevent a court from granting an Order for Sale, it is usually a major factor in them reaching their decision. If the property is occupied by the debtor’s family, including children or elderly relatives, then a court may be reluctant to force the property to be sold, especially if this would involve the upheaval of children from their local education providers. If the occupiers are all over 18, or the property is only occupied by the debtor, then the court may be more likely to grant an Order for Sale.

It will depend entirely on the facts of each case and the debtor will usually seek to persuade the court why an Order for Sale is not appropriate or fair.

What happens if an Order for Sale is granted?

If the court grants an order, it will usually provide the debtor with one final deadline for them to repay the debt. If they do not pay by that date, then the order will set a date whereby the debtor has to give possession of the property to the creditor for the purposes of it being sold.

The court will usually set a minimum sale price for the property within the order and will also detail who should have conduct of the sale of the property.

Finally, the order will usually set out how the proceeds of the sale will be distributed.

If the debtor refuses to provide possession of the property by the date set out in the Order for Sale, then the creditor will need to obtain a writ or warrant of possession and a bailiff will be appointed to evict them from the property to allow it to be sold.